DRUG BUDGETS: HMOs PUT LIMITS ON DOCTORS’ PRESCRIBING
When HMOs "began as competitors to traditional healthThis is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
insurance, their benefits for prescriptions were often richer, in
an effort to get patients to use drugs and thus head off more
serious illness and hospital stays," WALL STREET JOURNAL reports.
However, since the cost of drugs for HMOs are increasing -- they
were "up about 13% last year" -- HMOs are searching for ways to
reduce drug costs. Some HMOs are increasing consumer co-payments
for drugs, while others "are restricting which drugs they cover."
And, in the latest development, many HMOs are "giving groups of
physicians a monthly drug budget, penalizing them if they go over
it and letting them share in the savings if they stay below it."
The HMOs contend that "such 'pharmacy risk sharing' gives doctors
... an incentive to consider the cost-effectiveness of drugs they
prescribe." The HMOs argue that "[a]s long as somebody else is
paying ... physicians won't take the time to research whether
costlier drugs are worth the extra money."
CRITICISM: Critics complain, however, that the system
"weakens the doctors' traditional role as patient advocates."
JOURNAL notes that one California physician group "must get by on
a mere $8 per month per patient." Physicians operating under
drug budgets say they have not denied any patients needed
medications. But critics contend that "the systems invite abuse
because doctors can earn more by writing fewer or less-costly
prescriptions." Dr. John Rourke, head of the California
Physicians' Alliance, said, "It's a bribe. It makes the
physician a double agent working for the insurance company and
not for the patient." University of Minnesota economics
professor Steven Schondelmeyer said that low drug budgets "could
result in a doctor not treating a patient appropriately."
ALWAYS A RECKONING: According to the JOURNAL, it "is easy
to see why drugs have become a major new target for HMO cost
cutters." Ken Laudan, an analyst at Hambrecht & Quist, said that
drug costs "were the biggest factor in HMOs' sluggish 1996
earning reports." He said that drugs "accounted for 10% of HMOs'
medical budgets last year, but for 50% of their cost increases."
Medi-Span Inc., an Indianapolis-based research firm, said one
reason for the increase "is beneficial new drugs, such as AIDS
treatments that can cost $1,000 a month or more." Medi-Span says
that costs for older drugs are also increasing; "prices on the
top 200 rose an average of 3.6% last year."
$AVING$ PLAN$: JOURNAL reports that most physicians working
for PacifiCare, an HMO run by PacifiCare Health Systems Inc.,
"face drug budgets and are exposed to unlimited losses for going
over them." Some of the plans doctors are buying insurance "to
cover a least part of such losses." Sacramento-based MedClinic,
a doctors group "whose HMO contracts contain pharmacy budgets,
has a list of expensive 'red drugs' -- those to be avoided if
possible -- and 'green drugs' --those considered more cost-
effective." Marilyn Stebbins, the pharmacist who devised the red
and green list, "says they are merely a guide." She said,
"Nobody is stopping a physician from prescribing a red drug"